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tv   Mad Money  CNBC  January 15, 2013 11:00pm-12:00am EST

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i'm jim cramer and welcome to my world. you need to get in the game. "mad money." you can't to ford to miss it. rise and shine and thanks for waking with cnbc. i'm jim cramer and there is always a bull market somewhere. it's go time. get up and make your best move. >> hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. call me. snoozing. that is what the market is doing. a little doze.
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it takes little gains after absorbing some early morning losses. but it is all about the nap. dow inching up. s&p crawling up .11. nasdaq backsliding. thank you apple. see the market has gotten tired here. and it rests at the opening for waking up from its slumber and finishing perky after the bell. it needs to catch a couple of winks. we keep hearing how valuations have gotten stretched, but then it crawls higher into the close. to me, i'm an old napper from way back. exactly what this market needs, like you need me to wake you up in the morning with the cnbc alarm clock app. ♪ hallelujah
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jp morgan announced that american express was too rich and was unceremoniously downgraded. jp said it lacks catalysts to go higher. the reason stretch valuations the lack of catalysts. and jp morgan pulls united continental. i got dozens of these and they are always the same. buy to hold, it is central casting cliche downgrades. i suspect you will be hearing one of them tomorrow about lennar, the great home builder no doubt because of stretch valuations. lack of catalyst. don't be surprised when they tell us the same thing in the end about facebook.
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it turned out to be as powerful as blockbuster video? repeat after me, stretch valuations and no catalysts. maybe they were waiting to get kicked to the curb. maybe something else at work that can make us some money. first, let me just say that this market has been nothing short of remarkable. apple, bad estimate cut. this stock seems to cut the heart out of this market every day. like the weird guy in "temple of doom." it is getting ugly out there. and it is so bad on twitter some holders are blaming my daughter for not liking the new itunes.
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we had horrendous headlines of a total government shutdown. still, it may lead to a downgrade in us debt. we are being told that the debt ceiling wrangling could be even worse for the country than going over the fiscal cliff. how is that for frightening? senator freddy krueger versus representative jason, hush-hush sweet speaker, whatever happened to baby budget? you get the picture so to speak. how about lululemon? this morning a reliable steady growth story. smaller paycheck. the end of the payroll tax holiday has to hurt retail doesn't it? and the facebook disappointment. you have this mystery announcement coming. instead we have an announcement
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of a tool to search information on big social networks. what a bust. yet the market didn't get hammered. there was no rally, and then we got the nap time and the fresh bull came to play into the bell. what is happening here? there have been different times along the way up where we had this same exact phenomenon like we are seeing here today. one at the beginning of the bull run. another occurred in the first three years in the '90s.
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we had about a half dozen since the new millennium. and every single case, every single one i can recall we get this moment where the market didn't get tired, but the analyst did. many big cap stocks had run up into their price targets. analysts stayed bullish or they actually even raised price and it was a mistake. and i'll tell you, let's use it, an endless target party. 700 goes to 900 and only if there were a two for one stocks split. the analysts were gun shy. not the cheering, but the support of analysts who might be able to recognize that business is good enough. given the litany of events, the debt ceiling, tax holiday loss, i can't blame anyone for getting off the bull.
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the breaks in the action often don't last a full day, like today. what happens? what happens if evaluations turn out to be attractive or what happens if the world gets better? what happens if we solve the debt debacle? once we are through the debt ceiling what leverage do republicans have? and the last chance to derail the term. i think i know what happens, the same thing that has happened always when we have had so many break outs they are left behind by the wall of worry. ask yourself, do you think that this many analysts could be right? do you think that these companies are going to prove to be brilliant exit prices? no.
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i bet that this is one of those moments where the world economies are going to be better. i say that because it is the same behavior i've seen over and over and over again. down days are days to buy, not sell. in order to get into this bull market, here is the bottom line, i think this market is simply taking a snooze after a big bull run, but wakes itself up perhaps with my alarm clock and if history serves me right, when stocks awaken they go higher not lower and it is turned out that their evaluations ended up being catalysts galore. bob in florida, bob. >> it is great to talk to you. south florida by way of teaneck, new jersey.
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i'm calling about krispy kreme donuts. i owned this stock years ago. i sold it and forgot about it and now it seems like they reinvented themselves. they're offering healthy items. the stock is up 70% since mid november and still trading at low p/e and peg. even talk about take over. >> i believe there is a turn going on. it has been ages since i looked at it. the last time i looked at it i chipped my tooth. i will do more work on it and see where this one can stop. nobody indeed does know. robert in massachusetts, robert. >> booyah jim, hail from massachusetts. >> fantastic. there you go pats, i don't know.
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>> sounds good. today, retail sales numbers were released for december and the 4th quarter. >> right. >> and the terms were solid firm, somewhat above the analysts expectations. now, yesterday, a company called eastern pacific released their earnings numbers with the upside bias going forward. can you comment on this company? >> this is the old liz claiborne. it's doing very well. these guys seem to be the right time. ascena, the wrong time. all right please. don't be alarmed the market just needs to wake up and based on my
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experience it will go higher not lower and indeed the valuations they are not stretched at all. "mad money" will be right back. ♪ >> coming up, right remedy? cramer has been looking for companies on the cutting edge of research that could be ready to rise. abbot labs has been banking on a breakup. now that the split is done, which stock could be ready to run? and later, america's overwhelming supply of natural gas has cooled off the price of this commodity. should you be looking to fill up on the fuel? cramer is going off the charts to find out. plus, cramer has his eye on ways to beat america's debt debate by investing in trends that won't quit.
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tonight he's drilling with newcomer laredo petroleum. all coming up on "mad money." >> don't miss a second of "mad money." follow @jimcramer on twitter. tweet cramer #madtweets. send jim an e-mail to or give us a call at 1-800-743-cnbc. miss something, head to our website.
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one of my top ten themes for 2013 is that you want companies that don't just sit there, do something as in create value for shareholders. or we like companies whose ceo's have seen "the shawshank redemption" and realize they need to get busy living or get busy dying.
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these companies are splitting because their parts are worth less together than they would be apart as separately traded companies. i call these my breaking up is easy to do stories. they have made us serious gains. but what do you do when the breakup happens? and isn't that the dilemma right now with long time fave abbott labs? i always saw it as a fast growing medical products company that was being held back by its slower growth pharmaceutical business. it announced it was going to split itself into two separate companies.
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a pharma company and the stub of abbot labs. i thought this was a terrific plan. i recommended the stock in 2011 and abbott labs gave you a healthy 24% return. on new year's eve when everyone else was out celebrating, abbott completed its corporate divorce. where before there was one company, now we have two. a slow grower and the new abbott labs, one that yields 1.7%. since the split up i have been inundated with people on twitter with people asking me what to do with abbott. and even more so over the next two years, in other words, ordinarily the stock to buy
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would be abbvie. but this is no ordinary spinoff. i like it so much that my charitable trust is sticking with abbott, too. i'm excited. the reason, the whole point of this spinoff was to free abbott labs from the shackles of its pharma business. now its true potential can be unlocked. it is in excellent position to grow revenues. you got nutritionals, devices, diagnostics and pharma, and it should expand at a rapid 35% compound annual growth rate. it still has a ton of room to expand its margins which are 500
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basis points below the industry average. we like it because it is a major component to helping to contain health care costs. the reason abbott can grow so quickly is because the company gets 40% of its revenues from emerging markets. especially super fast growing countries like india and china. and in the next few years that can go to 50%. its peers only get 10 to 20% of sales from emerging markets. abbott labs is retaining miles white as its ceo. he's the guy who masterminded the breakup. if he had decided to go to go
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with abbvie instead, i would've considered swapping. yeah, he is that good. i think his guide is conservative and beatable. abbott's forecast is for margins to expand. for every 100 basis points the earnings per share increased by 15 cents. what is going to happen, you are going to be able to say, abbott has a healthy balance sheet. that means the company still has a lot of flexibility to return capital, or they could make some smart acquisitions. the old abbott lab sold for 12 times forward earnings and the new sells for 17 times earnings. this is what is called multiple expansion and i predicted that we would see that after the breakup.
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i could see the stock going to 38. on the strength of the re-evaluation from the spin off. juicy yield, 4.7%, but i think the stock is not as good as abbott. but there is nothing big in the pipeline that would fuel much growth down the road. good managament along with the global footprint that is good. but a single drug for rheumatoid arthritis, this is what is the problem. it is counts for 40% of sales and that drug could start facing competition and the market is going to start thinking about that. that is a huge patent cliff and we don't know whether they have anything in the pipeline big enough to replace it. they are working on a drug for hep c. gilead seems to be in the lead. abbot has about the same
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valuation as pfizer. here is the bottom line. whenever a company breaks up. you need to decide which component to keep. with abbott it was easy. so forget about the pharma business. stick with abbott, yes, which i think can be bought, i rarely ever say this, don't need a pull back. i'll buy right here. after the break i'll try to make you more money. >> coming up. america's overwhelming supply of natural gas has cooled off the price of this commodity. as plans to export heat up, cramer is going off the charts to find out.
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now that 2013 has arrived, what is in store for natural gas? for years now, in the midst of a glut, the prices that fallen and remain at low levels and when that happens energy companies stop drilling. this was the story in 2012. as of last week, the number of natural gas rigs was down 46% from the year before. when companies cut back production enough, that was something that happened in the second half of 2012. the technology for extracting
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this improved so that maybe the cycle was broken. that is why tonight we are going off the charts to figure out where natural gas might be headed. garner thinks that trading natural gas is always a dangerous game. hence why traders call it the widow maker. garner believes that it is still too early to get bullish. garner does recognize there is a strong tendency to rally every year through april. the commodity suffers a sharp decline in late january. in short, she thinks natural gas
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is likely to go lower, maybe to go much lower. take a look at this weekly chart in natural gas. see that is that wedge pattern got that? since this bottom, okay, this wedge gives natural gas a ceiling of resistance at $3.70, the wedge is here, you have to look at this, just look at this line for a moment. there is a lot going on in this chart. now look at this level, this is the floor, it is $3.20. garner expects natural gas to be boosted by a strong seasonal tailwind starting in mid-february. in that month, she thinks it is likely it could break down, falling through the floor and
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triggering a sell off. i thought this was a good antidote. look at the bottom of the chart. the relative strength indicator or the rsi or the williams percent range. we mentioned the rsi often on and off and have encountered the williams percent range a couple times. this is a tool similar to this stochastic oscillator and helps measure when the under line securities are underbought or undersold. sellers have left the building and garner points out that natural gas is not over sold. therefore there is a lot of room for this to get hammered. it has not taken out those oversold levels.
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garner thinks that prices could tumble and the next level is $2.60 which was the starting point at the beginning of september. if you are someone who is looking to play the seasonal rally, garner wants to pick up the small position. however, she cautions that natural gas has a real talent for pushing the limits. that would be shocking to me. but she is the chartist and that is what she is saying. and she thinks it would be very hard to justify it with $2 natural gas. in this particular market, if the pullback to $2.16 happens she thinks that would be a great place to buy natural gas. what if garner is wrong about the late january pullback and it breaks out above the ceiling of
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resistance? she has a plan for that too. she thinks that could trigger a quick run to $4 and $4.50. her real thrust here is that we're going lower. the pull back could be on the horizon. check out the daily chart of natural gas, and what is at the bottom of the chart. this is interesting. this is why i wanted to do this. the commodities futures trading commission measures and releases statistics on what types of traders are involved and whether they are long or short, and it is in a report called the commitments of traders. the cot report. this is the bottom part. they classify commodity traders
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into three groups, small speculators, large speculators and commercial hedgers. these are the money managers and according to the latest data they are holding a net short position in natural gas that is not big. as a group they are short about 150,000 contracts. that is light. let's say it is not accessible. she notes that in the recent past we have seen large speculators hold 250,000 contracts. what does it mean? garner is suggesting that the short natural gas trade is not yet overcrowded and we could therefore see additional selling pressure as the big boys increase their bets into this near term strength. however, at some point this
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group will start covering the short positions and she believes that the covering alone could trigger the rally. so these guys get bigger on the short side and this commodity breaks down and then you go and buy the commodity, but not before the breakdown. my view? i do not recommend trading any commodities other than gold. she thinks it will rally from a lower level, and that is crucial. cheap energy is one of my favorite themes for 2013. but it is terrific for consumers like the companies that i have been recommending so aggressively. even if you are a bull on natural gas, no, you shouldn't be pulling the trigger. you have to wait for it to go lower. to me that is one more piece of
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evidence that 2013 will be another year of cheap natural gas. which is pretty much everyone in the book. let it come in. don't believe in this false four day rally. rowan in texas. >> hi jim, a big booyah to you. >> i like that. i'm real good, how about you? >> first of all, many thanks to you for giving us word on honey well. >> dave cote is doing a magnificent job there. >> at this time i want to ask you about apache corporation. they had some shaky news today from australia. but it seems they have problems lined up in canada and elsewhere. looking at the current stock price history and future predictions not only for the
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company but for the sector as a whole, do you suggest apa now? >> it is probably one of the best run companies out there. big egyptian and austrailian exposure but those are not helping it. the chart looks like it is firming up. but if that is the case we are going to make money away from oil stocks. >> let's go to chris. >> jim cramer, this is chris, thank you, sir. i want to tell you very quickly, you are one of my heroes, i believe that when you talk about the market, i just believe that you are spot on, on the things that you say and we appreciate that. >> you are terrific. it is tough to come out here every day. i joke with my friend david faber that coming out here every day, it is nice to hear from someone who says thank you. >> i appreciate you, i know that you have a lot of information in your head.
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i know that, sir, my big question is about magnum hunter resources. is it a well run company? do you think that it is a growth story with the possibility that the chart trajectory might be positive over the next three to five years? >> it is actually a coal option on oil. if oil goes up a lot the stock doubles. if oil doesn't do anything the stock goes down. if you think oil is going higher, it is a terrific play. if you don't, don't touch it. the charts show that natural gas can go even lower but that is not a bad thing. remember, i want natural gas low, not because i believe in the natural gas stocks, but
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because the chemical plays do so well in a low environment. don't move, the lightning round is next. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it. ♪ [ male announcer ] when we built the cadillac ats from the ground up to be the world's best sport sedan... ♪
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it is time for the lightning round. sell sell sell sell sell. sell sell sell sell sell. i do not know the calls ahead of time. are you ready ski daddy. starting with adam in new york. adam. >> booyah jim. >> booyah adam. i want to know what you think about agnc. >> i used to fight this one tooth and nail. i think the yield may not always stay that high. but i'm going to say, buy buy buy. >> samantha in north carolina. >> i'd like to know if silver coins should be held onto or sold. >> i like them. do not sell them. lou in florida. >> hey, jim, how are you? >> how are you? >> good, good, hey i was trying
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to get information on prospect capital. >> i think the market, the economy is strong. i would say that is a good situation. aaron in california. >> trying to find out about cat. >> i think cat is too high. i think the earnings are not going to be there. i don't want to buy cat here. my trust sold it. let's go to russ in ohio. >> hey, jim. big bowling green state university booyah to you. >> students love it. how can i help? >> i'm looking to start a position in kelly services. >> i think that is very wise. caswell in rhode island, what's up? >> first energy is up. >> everyone is telling me this is the next one to go much lower. don't buy. i believe the yield is good.
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the economy is getting better. leon in iowa. >> hi, jim, from des moines iowa. >> how are you, sir? >> pretty good. >> back in the first part of last year, medco pharmacy and express scripts merged. so i thought they were a sure winner and bought some. added it to my portfolio in early april. i called you later and you recommended them and like a charm they went up 15%. but they have been going down. >> my take is that it is okay to buy. i like cvs caremark. that's a better play. and that is the conclusion of the lightning round.
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>> coming up, reenergized? cramer has his eye on ways to beat america's debt debate by investing in trends that won't quit. tonight he is drilling into american energy development. could you strike oil with this fresh face? ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. sic: "make someone happy". music: "make someone happy" ♪it's so important to make someone happy.♪ ♪it's so important to make someone happy.♪ ♪make just one someone happy ♪and you will be happy too.
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a few short years ago the idea that north america could become energy independent seemed like a pipe dream, but it could be within our grasp. i wanted to talk about one of the companies that is making the american energy renaissance possible. laredo petroleum. lpi. company down in texas as well as
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a sizable position on the state line. you may not have heard of laredo. stock ending up slightly above the ipo price. however, i think this one is worth bringing to your attention. for 2013 the company's overall production has gone up. let's take a closer look with the founder, chairman and ceo who has created and sold two oil companies before this, although both of them were private so you couldn't get in on the action. welcome to "mad money." have a seat. the other two were private so we don't know.
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is this one like those if we buy the stock? >> the other two companies were private. we were looking at going public. we had the back room and we wanted to see if someone would pay us for it. same with the second company. this company was different. we got to the point where we realized that we captured a large group of drilling locations. and it was probably needed to access public money. we have the ability to drill these horizontal wells and
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stimulate them has been a change in just a global change in the way the energy business looks. we think these targets are exceptional. >> people, they still don't get it. what was in the ground, the permian has been around forever, suddenly we were able to access what you couldn't? >> we knew all along there were many of the zones that were generating oil and gas for years. we would get just enough oil and gas to mess up our drilling system. with horizontal wells, we can now produce these zones that we knew were there for generations. >> who is unwise enough to sell you properties given your history and success? >> there was a lot of running room out there.
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we have been there at our prior companies and we bought our first acres out there in 2008 in a county where there was one other drilling rig. today there is 35 or 40 drilling rigs. >> some others are worried that you are going to outspend your cash flow. sandridge had bigger eyes than what they had the money for. aubrey mcclendon, some feel he outspent. >> how do you know your cash flow will cover your drilling program? >> last year we articulated a greater outspend because we were trying to prove the acreage, to get the data to develop a plan. we think we have been very, very disciplined and still have a lot of liquidity left and we think we have a couple of years of
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drilling just on that, and as a revolver should grow, we think we are good. but we also have access to perhaps public equity. we think this property is great for a joint venture. we have assets that aren't as strategic to us. we are not capital constrained today. we are data constrained. we are running at the cadence we would run at if we weren't worried how we finance this 10 or 15 year period. >> crude is great. is there any turn coming in
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natural gas liquids as chemical companies build refineries here? >> i also think that with the advent of this drilling technique we are going to be able to bring the supply to meet the demand. i think natural gas prices grow. >> that sounds more like eog. which is successfully navigated. i want to thank randy because of his reputation. you have to take a hard look at this. "mad money" is back after the break. thank you, sir. ♪ you know my heart burns for you... ♪
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>> buy dell or not to buy dell. that's the question. dell is almost precisely even. dell does go private i think it will be at roughly almost 15. they broke the news this afternoon that they would like to do a deal at 14 or 15. good luck. there is only so much cash flow to go around to continue to innovate if the deal was done. michael dell will not do a deal that could hurt the long-term fortunes of his company. because there isn't enough earnings for them to keep it up here.
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even though it is dell that has been the company. those fortunes have been spent to design systems that are loved by governments and nonprofits. and that is terrible clients right now. plus we know that the entire price that has been ruled by the cloud. it is funny when the stock was only at 11 i thought what an opportunity. but as it got closer to 13, if you owned it you need to sell it if it goes closer to 14 tomorrow. let's strategize about if the stock goes back to 10. at that price remember half of dell's business is global. it isn't including the possibility that we develop a tax regimen in this country that
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encourages repatriation of profits. but that has to happen and it doesn't include the notion that you and i haven't thought of. a wealthy player that believes in the vision of being a one stop shop for the smaller and medium businesses. the idea that could be considered reasonable. it will be replaced by a smartphone and a tablet that is certainly possible. if you think it is the latter then at $11 well, i got to tell you, you should be in dell. this stock isn't going back to $9 and change. but you better wait until it cools down before you buy. as we know, no man's land is a very, very bad place to be. stay with cramer.
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